Income on property transferred or loaned to your children if they’re under 18 will almost always be attributed back to you—so you’ll have to pay the tax on any dividends and interest earned on that money at your regular rate. However, that’s not the case with capital gains. Let’s say you give your 5-year-old $100,000 and she uses it to buy shares of a bank stock in her name. By the time she’s 18, those shares could be worth $200,000. She could then cash in $20,000 worth of stock a year, and pay the capital gains taxes on that growth at her own much lower rate.
Tax savings: Thousands of dollars—provided you don’t have a falling out with your kids.